Abstract
Our paper applies the balls-and-bins model to China’s shipment level trade data of 2005. Similar to the results of the US data, we find that the balls-and-bins model matches the numbers and the gravity patterns of zero trade flows both at the country-product and country-firm levels reasonably well, but fails to predict the percentage of exporting firms as in the data. However, different from the results of the US data, we find that the model fails to predict the percentages of the single-product, single-destination, or single-product and single-destination exporting firms as in the data.
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Notes
We provide the detailed discussions about the carry-along trade and our results in an “Appendix” to this paper.
We have also used the trade value share of each category as the size of the bin and obtained very similar results.
The most disaggregated product category is defined at the HS 10-digit level in the USA while at the HS 8-digit for China. HS system is only internationally comparable at HS 6-digit level. By comparing the products numbers of the US HS 10-digit and Chinese HS 8-digit products, we think that Chinese HS-8 product is coarser than or at best comparable with the US HS-10 product.
We do not use the cutoff of the US standard for \(\$2500\) because it will drop 31.52 % of the total shipments.
The source country standard is based on the value added. The existence of China-to-China imports implies that some goods that have been exported by China are shipped back to China again.
The shipment level customs data and the firm level industrial survey data have different coding systems for firms. As a result, the two datasets cannot be accurately merged.
This also helps us to evaluate the potential effect of the approximation method we use in calibrating the model. The industrial firm survey dataset mainly includes those large firms in terms of sales. Thus, it is reasonable to believe that the number of shipments of each firm should be larger than three in the actual data.
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Acknowledgments
We are very grateful to the coordinating editor of this journal, Robert M. Kunst, and an anonymous referee for their constructive comments and valuable suggestions, which significantly improved this paper. We also would like to thank Paul Evans and Bill Dupor for their valuable comments.
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Shi, H., Jiang, Z. The missing trade of China: balls-and-bins model. Empir Econ 50, 1511–1526 (2016). https://doi.org/10.1007/s00181-015-0987-y
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DOI: https://doi.org/10.1007/s00181-015-0987-y